With two other of the stocks in my portfolio currently under Chapter 11 bankruptcy, I was glad to learn that Liberty Media would come to the rescue for Sirius XM Radio, Inc. Liberty CEO John Malone will infuse $530 million into the company, getting a 40% stake, as well as a couple of seats on the company's board. Not only does Sirius XM need the cash to pay it's debts, but I think it also needs some fresh ideas as to just exactly how Sirius will be profitable going forward.
The merger of XM and Sirius was a good idea, though we haven't been able to see the fruits of that yet. Nor have we been able to determine just how good an idea it actually was, because right about the time that the two satellite companies were pleading their case before anti-trust regulators, and throngs of others against the merger, an economic crisis unlike any we have seen for at least 30 years in our history was lurking. Ultimately that very crisis killed the market that was the primary source for both XM and Sirius' new subscribers—the auto industry.
Long before the merger I wrote on a Sirius stock message board that I felt that Sirius would have to turn to some form of advertising in order to keep itself afloat. I still hold this thought today. Though it's a bit of a tricky deal. Everything will need to be in the details. Part of satellite's draw, aside from it's focused content offerings, was that it would be commercial free. So, simply thrusting regular radio commercial spots onto their paying listeners would be a betrayal, and I think also would be the death of satellite radio—at least as we know it.
Sirius XM needs to be as innovative in creating new revenue streams as were the pioneers of internet search, Larry Page and Sergey Brin, founders of Google, Inc., who successfully made advertising less intrusive, more informative, and because the advertising was directly related to search inquiries, it also made it an invaluable source of new customers for all sorts of business' product offerings.
Perhaps Sirius XM can somehow infuse that idea of content related advertising into their programming, or perhaps they'll come up with something entirely new.
When it comes to satellite radio, the truth is that we're in the baby stages of the industry. It's a learning process. Other players most likely will come onto the field to fill the gaps that Sirius XM cannot. Much like happened to AOL, Webcrawler, and even Yahoo to some extent. For that reason I'll be watching very closely in the next year or two to see where this company is going. I haven't given up yet. But they must turn a profit. If they don't, the next Google will be right around the corner waiting for their "in," and I will be out.
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